Update by Evelyn Tsao, Articled Student and Erin Brandt, Cofounder

It is a fundamental principle of contract law that a contract is only enforceable when there is mutual consideration (i.e. where both parties receive something of value). In the employment context, the question of consideration usually becomes a problem when an employer wants to amend the terms of employment after the employment relationship has already started. 

The case of Sui v HungryPanda Tech Ltd., 2024 BCSC 1856 is a useful reminder to employers to be careful about presenting an offer of employment that doesn’t include the full terms of employment and the importance of fresh consideration when subsequent employment agreements are signed.

Background

The Plaintiff, Xing Sui (“Sui”), was employed as general manager of HungryPanda Tech Ltd. (“HungryPanda”), a food delivery platform, for approximately 18 months from May 3, 2021 to October 25, 2022.

Prior the start of employment, the parties discussed the prospective employment. On April 23, 2021, HungryPanda sent Sui an email offering employment and outlining the principal terms of employment (“the Offer”). The email also stated “After your confirmation we will provide you with an official employment agreement for your signature”. 

On April 24, 2021, Sui accepted the email offer of employment by email (“the Acceptance”). 

On April 25, 2021, HungryPanda sent Sui a document titled “Employment Agreement” and the parties signed it the same day (“the Employment Agreement”). The Employment Agreement contained a termination clause allowing the employer to terminate the employee without cause as prescribed by applicable employment standards legislation. There was also an “entire agreement” clause which stated that the agreement will “supersede any and all pre-existing employment agreements between the Employer and the Employee”. 

On October 11, 2022, Sui was notified that his employment was being terminated without cause, effective October 25, 2022.

Sui brought a wrongful dismissal action against HungryPanda claiming that the Offer and Acceptance formed an employment contract, and that since the Offer did not include a termination clause, he is entitled to reasonable notice at common law. 

HungryPanda argued that the Offer did not form a binding employment contract because they had conveyed to Sui that a full employment contract would be presented at a later date. In the alternative, HungryPanda argued that the Employment Agreement is binding as it was supported by fresh consideration. 

Decision

The Supreme Court of British Columbia found that the Offer and Acceptance constituted a binding employment contract because all elements necessary to form an employment contract were in the Offer – including for instance, job title, place of employment, start date, salary, pay periods, stock options and a three-month probationary term. 

In coming to this finding, the Court distinguished the case of Bern v Amec E&C Services Ltd., 2007 BCSC 856, which held that where an employer has conveyed to the employee that they must execute a full employment contract at a later date, prior communications do not form a binding contract. What was different in Bern was that the employer in that case had expressly stated that the offer of employment was conditional on the plaintiff providing proof of his legal right to work in Canada when referring to an employment agreement that is to come, as opposed to the situation in Sui where there was an absence of conditional language in the offer which referenced the later employment agreement. 

The Court also relied on the principle spelled out by the Supreme Court of Canada in Ethiopian Orthodox Tewahedo Church of Canada St. Mary Cathedral v. Aga, 2021 SCC 22 that: “in determining whether the parties’ conduct met the conditions for contract formation, the court is to examine “how each party’s conduct would appear to a reasonable person in the position of the other party’.” The Court concluded that from an objective view, a reasonable person would view the Offer and Acceptance as having formed a contract, and that the subsequent Employment Agreement was only a formality to document those terms.

As to the status of the Employment Agreement, the Court relied on the test in Kriser v Active Chemicals Ltd., 2005 BCSC 1370 and concluded that there was no fresh consideration for the Employment Agreement as Sui received no material advantage from the said agreement. While HungryPanda sought to argue that there was fresh consideration for the Employment Agreement such as paid time off and group health benefits, the Court rejected the argument as (a) the paid time off provided was only the statutory minimum and (b) there was nothing suggesting that Sui would not have received the group health benefits without the Employment Agreement.

Hence, the Employment Agreement was held to be unenforceable and Sui was entitled to reasonable notice at common law.

Key Take Away for Employees

Employees should be mindful that acceptance of an employment offer constitutes a binding agreement.  They should also avoid being blindsided by their employer into signing what looks to be a standard employment contract when it in fact contains employment terms which are different from what was initially offered. 

When agreeing to any form of employment contract, employees should always think one step ahead and be cognizant of their entitlements upon termination. 

When asked to sign any new or subsequent agreement, employees should ask themselves whether there is a mutual exchange of value and seek legal advice on the implications of the proposed new contract.

Key Take Away for Employers

It is common practice for employers to give prospective employees an offer containing the essential terms of the employment before asking the employee to sign their standard employment agreement. The case of Sui reminds employers of the legal principle that Offer + Acceptance = Contract, and the need to ensure that when making an initial offer, it is expressly conveyed to the prospective employee that the offer is conditional upon the prospective employee signing a formal employment agreement. Simply saying an employment agreement may come is not sufficient.

Better yet, employers should provide the offer of employment together with the formal employment agreement as one package, rather than splice the process into two separate stages.

If an employer does provide an employment agreement separate from the initial offer with new terms not previously mentioned, fresh consideration in the form of material advantage to the employee might be required in order to enforce the new terms.